Q3 demand for resale private homes slips as prices continue to rise: Savills

Nov 19, 2022

SECONDARY sales for Singapore private residential homes fell 10.5 per cent in the third quarter from the previous three months, after a rebound in sales in the second quarter, Savills' research showed.

The July to September period saw only 3,961 units transacted on the resale market due to economic uncertainties, a recalibration of cooling measures in December 2021, rising inflation and the attendant increase in interest rates, said Savills analysts on Friday (Nov 18).

While secondary sales islandwide saw a fall in volume in Q3, the largest decline came from the city fringe area, or the Rest of Central Region (RCR), where transaction volumes fell 14.3 per cent from Q2 to 1,135 units. Secondary sales in the suburban areas - the Outside Central Region (OCR) - shrank 10.1 per cent to 2,108 units, while volume in the prime Core Central Region (CCR) slipped 3.5 per cent to 718 units.

The dampening effect of cooling measures and higher interest rates were also observed to affect buying from permanent residents (PRs) and foreigners more than Singaporeans. On a quarterly basis, purchases by PRs and foreigners both showed double-digit percentage declines in volume by 17.1 per cent and 11.3 per cent, respectively, while Singaporeans' purchases fell comparatively less and were down 8.4 per cent.

As a result, the proportion of total purchases by PRs fell 1.3 percentage points to 15.9 per cent, while the share of sales from foreigners slipped 0.1 of a percentage point to 4.7 per cent, according to Savills' research. This put the segment of Singaporean purchases at 79.3 per cent in Q3. Compared with the pre-Covid period, the proportion of foreign purchases continues to remain low, the firm noted.

Still, prices of Savills' basket of high-end non-landed private residential projects rose for the eighth consecutive quarter to an average of S$2,544 per square foot in Q3, although more slowly at 0.6 per cent compared with the 1 per cent rise in Q2. Year on year, luxury non-landed prices were up 3.5 per cent in Q3.

"Nevertheless, prices of high-end properties are remaining resilient despite global economic uncertainties," Savills said. "The strong Singapore dollar and inflow of the ultra-rich setting up companies and family offices here have supported this segment of the market."

Prices rose across the board in Q3 - the Urban Redevelopment Authority's private property index rose for a 10th consecutive quarter by 3.8 per cent, more than Q2's 3.5 per cent quarterly increase. This was largely due to a record 7.5 per cent growth in non-landed OCR home prices, the highest since Q3 in 2009.The overall price index showed a muted 0.4 per cent increment in Q1, slowing significantly after December's cooling measures put the brakes on a 5 per cent surge in Q4 of 2021.

Savills has revised its price forecasts upwards by three basis points, as it estimates a 10 per cent gain in private property prices this year.

Noting that home prices in Singapore have continued "powering on" in the face of economic weakness and rising interest rates, this was not to say that the domestic market does not respond to such negative factors, Savills said. And while government interventions have been introduced, "they have not been overly restrictive". Meanwhile, household liquidity has been on the rise.

"Thus far, the slate of cooling measures and their subsequent recalibrations have been behind the potential demand curve," said Alan Cheong, executive director for research and consultancyatSavills. "With the benefit of hindsight, what the measures did was disorientate the potential market participants into deferring their purchases. This has the effect of creating pent-up demand that would in due course discharge."

For 2023, the firm said prices may still grow by 7 per cent, if they remain sticky and floating mortgage rates rise to 5 per cent.

"This baseline increase is driven mainly by high cost of production (land and construction). However, if borrowing costs rise further from today but are expected to fall, prices could rise 10 per cent year on year," added Savills.